Anywhere Real Estate’s settlement agreement in two class action antitrust lawsuits dealing with buyer broker compensation raises important questions about the future of buyer’s agency and how other defendants are viewing the fast approaching trials.
Top of mind, of course, is what exactly the settlement agreements include, besides an agreement by Anywhere to pay a total of $83.5 million in damages for both the Moehrl and Sitzer/Burnett suits.
Steve Berman, the managing partner and co-founder of Hagens Berman Sobol Shapiro LLP, which represents the plaintiffs in the Moehrl suit, said the “settlement includes significant changes to Anywhere’s practices relating to the conduct that we have challenged.” However, the exact terms of the settlement won’t be known until the plaintiffs file a motion to approve the settlement agreement. Anywhere declined to comment on the exact terms of the agreement.
Meanwhile, Steve Murray, the co-founder of RealTrends Consulting, said he believes the changes Anywhere proposed to make could mark the end of buyer broker compensation as we know it.
“As far as cooperation and compensation, that is now pretty much over,” Murray said. “The biggest combined brokerage company in the country in terms of all their brands, just said, ‘We’re out. We are not going to defend this case anymore,’ so that will definitely lead to changes.”
Murray sees three possible outcomes for the lawsuits.
“Worst case scenario, the broker representing the buyer will have to negotiate their own fee with their client and the seller can no longer be compelled to make a blanket offer of compensation in order to list on the MLS,” Murray said. “The second thing that could happen is that more and more buyers will go directly to the listing agent, in which case they are clearly unrepresented. The third thing that would happen is a whole new kind of buyer brokers arise that charge an hourly flat fee to represent buyers,” according to Murray.
In preparation for these outcomes, Berkshire Hathaway HomeServices Drysdale Properties broker-owner Gretchen Pearson said she has been working with her agents to implement buyer’s agency agreements.
“If an agent files a buyer’s agency agreement for me, the broker, to review, the work flows just aren’t there in our document management system,” Pearson said. “The software we use isn’t built that way.” Therefore, it won’t just impact agents, but technology systems, she added.
While the lawsuits’ potential impact on buyer’s agency and buyer broker compensation is the largest question looming, Murray also wonders how the settlement agreement will impact Anywhere’s many franchise owners.
“Will the plaintiffs now just go and start suing individual Coldwell Banker franchises?” he posited.
When asked how the agreement would impact its affiliates, Anywhere highlighted a line from their initial statement.
“Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees,” the company said.
Murray said he believes this could be the start of more settlements to come from the other defendants in the suit.
“They are all going to be running for settlements now,” Murray said. “I think this is a floodgate moment for sure.”
Ken H. Johnson, the associate dean of graduate programs for the college of business at Florida Atlantic University, is holding off on making any predictions, suggesting it might depend on the terms spelled out in the settlement agreement.
“If they are settling this and it goes away and they don’t admit wrongdoing and there is no requirement to change policies,” he said. Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.
The National Association of Realtors, a defendant in both lawsuits, says it is not giving up the fight.
“Settlement is always an option for any party in litigation. NAR’s commitment to defend ourselves in court remains unchanged and we are confident we will prevail in proving the lawfulness of the rules under attack. Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Mantill Williams, NAR’s vice president of communications, wrote in an email to HousingWire.
The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having many buyer brokers participating in that local marketplace, NAR noted.
For buyers, the NAR argues these marketplaces save them the burden of extra costs at closing, allowing them to get professional representation and make homeownership possible for more people.
Keller Williams, RE/MAX, and HomeServices of America, the lawsuits’ three other defendants, declined to comment.
The Sitzer/Burnett lawsuit is scheduled to head to trial on October 16, 2023, while a trial date for the Moehrl lawsuit has yet to be set, but it is expected to take place in early 2024.
Originally filed in 2019, the Moehrl and Sitzer/Burnett lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.